"The key takeaway from today is that the government's vulnerability to pressures from alliance partners goes up and its ability to negotiate a deal with DMK and the other alliance partners becomes even more critical for the safe survival of the government," believes AK Bhattacharya of Business Standard.
AK Bhattacharya, editor, Business Standard believes that the UPA government is now vulnerable to pressure from its allies.
The DMK Chief, M Karunanidhi today decided to pull out of UPA after expressing dismay on India's stand over Sri Lanka at the United National Human Rights Council (UNHRC). Questions have been raised over the UPA government's stability after the DMK pull out .
Bhattacharya, however, says "the government is not entirely unsafe" as it has the support of the Bahujan Samaj Party and the Samajwadi Party.
"The key takeaway from today is that the government's vulnerability to pressures from alliance partners goes up and its ability to negotiate a deal with DMK and the other alliance partners becomes even more critical for the safe survival of the government," he said in an interview to CNBC-TV18.
Below is the edited transcript of Bhattacharya's interview to CNBC-TV18.
Q: What construction have you placed on the DMK’s pulling out the Government? Do you think we are going to have a United Progressive Alliance (UPA) minus Dravida Munnetra Kazhagam (DMK) by the end of the week?
A: The government is not entirely unsafe. It has major hurdles to cross in the coming days even though technically, the government will have the support of atleast the Bahujan Samaj Party (BSP) and the Samajwadi Party (SP) from outside to keep the government going. The key question would be, in what way the government manages to get its resolution passed in the parliament. So, the government has become more vulnerable to pressures from its allies and those that support the government from outside.
What now becomes questionable is the government’s ability to execute their planned policy actions. The key takeaway from what happens today is that the government's vulnerability to pressures from alliance partners goes up and its ability to negotiate a deal with DMK and the other alliance partners becomes even more critical for the safe survival of the government. That is why the market was skittish and very nervous to whatever happened today.
Q: What would worry you the most in terms of which policy actions or which reforms could get hindered because of what's happening, whether it is in the form of the diesel price hike or the Direct Taxed Code (DTC) Bill?
A: Fortunately, the diesel price and the DTC Bill are not the worry points. The real worry points are the government's moves to liberalise the insurance sector and the pension sector. These are not part of the Budget that was presented a month ago and both the sectors, the reform bills are still pending.
On one hand it doesn't have the Bharatiya Janata Party (BJP) to fully back it on the insurance and pension sector bills. Therefore, atleast these are two areas where I feel that the government will be on a sticky turf.
On diesel and DTC, the government has managed to put in place a system. DTC will take place from next year and that's next year's issue. But the current year's issue is that the government must go on and issues such as the pension reform and the insurance sector reforms should be sorted. These will be in trouble.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.